Kuwait Cleanup Costs Exaggerated

ANALYSIS

By
Peter H. Johnson, Special to The Christian Science Monitor. Peter H. Johnson is responsible for business in Kuwait for a major United States bank. /
May 7, 1991

KUWAIT CITY

`RECONSTRUCTION Costs Set at $100 Billion to $300 Billion," trumpets the advertisement for an upcoming London conference on Kuwait's rebuilding. However, from the 18th floor of Al Ahli Bank's headquarters here, Kuwait City looks untouched. Apart from the oil smoke which now sometimes covers downtown, most of the city appears as it has on my many visits before last year's invasion by Iraq. The vast majority of Kuwait's buildings, bridges, roads, and other elements of the infrastructure are structurally s ound, and most haven't really been touched. Many officials, businessmen, and bankers in Kuwait conclude from this that - apart from the burning oil fields - Kuwait does not need a massive and immediate reconstruction effort driven by large government contracts. Instead, these officials see a lower-intensity cleanup, refurbishing of some buildings, and restocking of inventories, sponsored by the government or by the private sector. They also see this taking place over the next year or two rather than happening in a sudden flood of contracts.

The assumption of massive reconstruction costs has sparked some news stories that the Kuwaiti government is preparing to borrow up to $20 billion to boost its financial reserves. The growing recognition of lower-scale reconstruction needs, however, convinces officials and bankers in Kuwait that the government will not need to resort to large-scale loans. This is so despite the remaining demands on reserves related to the oil fires, commitments to coalition allies, and a likely bailout of Kuwaiti banks f rom what is expected to be billions of dollars in unrepayable debts.

At present, almost nobody is actually out doing any cleaning or even restocking shop shelves. Partly this is because owners of many small businesses haven't returned yet, partly because there are too few people to create a market for many businesses.

Apart from thriving car repair shops, the only businesses drawing any number of customers are the banks. However, the transactions they are engaging in are mainly limited to exchanging old Kuwaiti dinar notes for new and converting a limited number of dinars to foreign currency. Most customers - including local businessmen - want to convert the maximum allowed into foreign currency and transfer it abroad. Bankers report that only a few customers - although a growing number in recent days - are intereste d in importing equipment or stock for their businesses. Illustrating the people shortage perfectly: Several Kuwaiti banks are themselves hampered by a lack of key staff and are advertising in Arabic newspapers in London, Cairo, and the Gulf trying to get them to return.

The government has also already encouraged key government employees to return. Other Kuwaitis will be allowed back starting May 11. The Ministry of Planning says the number of Kuwaitis in residence after liberation was 200,000, compared to a pre-invasion level of 600,000. With health concerns about oil smoke and the pent-up demand to get a break after months of occupation, more have left, as the lines of cars at the Saudi border attest, even as others have returned to key jobs. An evening sampling of fl ats and houses in Kuwaiti neighborhoods suggests only one out of five at home, or about 120,000.

Among those in residence, there is a hesitation to begin cleaning up as people wait to see "who is going to compensate me." Kuwaitis are accustomed to the government cushioning many of life's harder financial edges, so there is widespread expectation of government compensation and, perhaps, government-sponsored contractors to do even general cleanup. The temptation to wait for a clear government policy on the cleanup has been heightened by Iraq's agreement to pay reparations.

Further slowing cleanup efforts, Kuwaitis don't have much of the foreign labor available that they are accustomed to employing for manual tasks and administration. Many foreign workers left during the occupation; many others, especially Palestinians who make up the administrative class, are staying at home due to the backlash by Kuwaitis against some who collaborated with the Iraqi occupation.

Nevertheless, such sights as the gutted Sheraton Hotel being cleaned up for refurbishing and the Alghanem General Motors dealership receiving new cars for sale demonstrate that the process has begun in spite of many apparent obstacles. Though the cleanup is slow to get going, the fact that the country doesn't have to be entirely rebuilt is good news for harried government planners and ordinary citizens.